WTW highlights growing case for moving employee benefits into captives
Companies are increasingly considering whether to bring employee benefits into their captive insurance arrangements as they look for greater control over costs, risk and workforce data, according to a new analysis from WTW.
In a new article examining “why and how” employers can move employee benefits into a captive, WTW says the approach is attracting greater attention as organisations grapple with rising benefit costs and pressure to make their programmes more effective.
WTW says employee benefits can represent a significant and increasingly complex source of risk for multinational businesses. Bringing some of that risk into a captive can give employers greater control over how it is financed, while providing access to claims information that may be difficult to obtain through conventional insurance arrangements.
The adviser argues that this data can be particularly valuable. Better visibility of claims and workforce health trends can allow companies to identify emerging risks and potentially target interventions more effectively, while also helping them assess whether their benefits programmes are delivering value.
Cost is another important consideration. Rather than transferring all risk to commercial insurers, a captive allows an employer to retain more of the underwriting economics, although WTW stresses that the potential benefits need to be assessed against the additional capital, governance and operational requirements involved.
The structure is not necessarily limited to businesses that already operate large captive insurance companies. WTW points to different routes for organisations considering the move, with the appropriate model depending on factors including the employer’s size, existing insurance arrangements and appetite for risk.
However, moving benefits into a captive requires careful planning. WTW says employers need to establish a clear business case, assess the risks that are suitable for inclusion and consider regulatory and operational issues in the countries where benefits are provided.
The process also requires collaboration across functions, bringing together risk, finance and human resources teams rather than treating the decision solely as an insurance matter. WTW has highlighted this cross-functional approach through its work with captive owners and benefits leaders, including discussions around the structural options and regulatory implications of bringing benefits risks into captives.
The analysis comes as interest in benefit captives continues to grow among multinational employers. WTW’s recent activity in the area includes forums and discussions focused specifically on employee benefits captives, suggesting the issue is moving further up the agenda for companies already using captives or considering them as part of their wider risk strategy.
For employers, the attraction is ultimately about more than insurance. WTW’s analysis presents the captive as a potential tool for combining risk financing, cost management and better use of employee benefits data at a time when companies face increasing pressure to demonstrate value from their benefits spending.
To read the article click here.
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